Should You Invest in the iShares U.S. Financial Services ETF (IYG)?

Launched on 06/12/2000, the iShares U.S. Financial Services ETF (IYG) is a passively managed exchange traded fund designed to provide a broad exposure to the Financials - Broad segment of the equity market.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $2.73 billion, making it one of the larger ETFs attempting to match the performance of the Financials - Broad segment of the equity market. IYG seeks to match the performance of the Dow Jones U.S. Financial Services Index before fees and expenses.

The Dow Jones U.S. Financial Services Index measures the performance of the financial services sector of the U.S. equity market.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.42%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.23%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector--about 84.20% of the portfolio, followed by Information Technology.

Looking at individual holdings, Jpmorgan Chase & Co (JPM) accounts for about 11.45% of total assets, followed by Visa Inc Class A (V) and Mastercard Inc Class A (MA).

The top 10 holdings account for about 56.89% of total assets under management.

Performance and Risk

So far this year, IYG has added roughly 38.25%, and it's up approximately 61.23% in the last one year (as of 10/26/2021). During this past 52-week period, the fund has traded between $118.36 and $203.56.

The ETF has a beta of 1.26 and standard deviation of 31.11% for the trailing three-year period, making it a high risk choice in the space. With about 109 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Financial Services ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IYG is a reasonable option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Financials ETF (VFH) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR ETF (XLF) tracks Financial Select Sector Index. Vanguard Financials ETF has $11.76 billion in assets, Financial Select Sector SPDR ETF has $46.14 billion. VFH has an expense ratio of 0.10% and XLF charges 0.12%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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iShares U.S. Financial Services ETF (IYG): ETF Research Reports
 
JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
Visa Inc. (V) : Free Stock Analysis Report
 
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
 
Vanguard Financials ETF (VFH): ETF Research Reports
 
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